Credit Mama's Notebook

Debt Collectors Go Beyond the Grave for Money

noreply@blogger.com (Unknown) — Wed, 04 Mar 2009 17:30:00 +0000

According to the New York Times, "dead people are the newest frontier in debt collecting" – and apparently a lucrative one as well.

Yes, it's true – debt collectors that are "trained in the five stages of grief" (according to Adam Cohen, chief executive of Phillips & Cohen Associates of Westampton, N.J.) – telephone surviving family members to sympathize with their loss and then encourage them to make good on the deceased person's outstanding bill.

"We want the dead to rest easy, knowing their obligations are taken care of," said Michael Ginsberg of Kaulkin Ginsberg, a consulting company to the debt collection industry.

Never mind the fact that in most states, survivors are NOT obligated to use their own assets to pay for a dead relative's bills. Collectors can file against an estate and are actively using the databases of the country's 3,000 probate courts to discover when estates are opened, but if there is no estate to go after, collectors use the power of sympathy and the pitch of "honoring the wishes of their loved ones." Most of those being called probably believe they are required to pay the debt, as it is not clearly disclosed at the onset of the communication. It seems that the creditors/collectors could be pressing vulnerable, ignorant, non-culpable relatives into taking on the dead's non-existent responsibilities, thereby making the deceased relatives own debilitating debts, which weren't theirs until tricked or otherwise coerced.

Joel from Lowell, Mass., commented, "It was deeply upsetting for me to get a collection call about my father's Sears charge card balance a year after he had died. My father left no estate, and none of what he bought with the small outstanding balance had gone to me. It angers me that this big company was trying to make me feel guilty or responsible for a debt that was in no way mine and that I had no moral, much less legal, obligation to pay."

He isn't the only one outraged by these collection tactics.

Christine in San Francisco said, "As a Ph.D. candidate in psychology, the thought that the five stages of grief developed by Dr. Kubler-Ross could well be used to manipulate people to pay money they don't legally owe is beyond contempt. Particularly given the fact that many more deaths will not be the result of illness, but sadly, the increase in suicide rates resulting from the economic crisis. Here's a better idea: why don't these people get trained in goading rich people to pay the taxes they owe from their off shore bank accounts? Maybe guilt and fidelity won't be as lucrative in this endeavor, but I am sure the market is bigger."

This story, posted by Michael David of North Vancouver, summarizes such an experience:

When my father died after a debilitating and ultimately futile battle with cancer in 1991, we discovered that he had used his credit cards to pay for his obviously-ineffective chemotherapy treatments. Now, the creditors wanted their money and were calling, and calling…and calling…and though we understood ourselves to “not” be legally-responsible for his debt, they insisted every day (and several times a day) that we were.We didn't even have a chance to grieve because now, in addition to trying to bury our dead father, we had to continue telling creditors that he was no longer alive! But they wanted their money and insisted that we "were in fact responsible," contrary to what this article reports.What I don't understand is, why is this news now? "Suddenly" creditors have discovered this newest source of revenue?

After the 15th phone call in five days, an agent from Visa Credit Card services screamed into the telephone, demanding that my brother "provide a final address to send the bill to." So he obliged her by giving the address of the cemetery and told her to "go dig him up." After he slammed the phone down, I took a pair of scissors and physically cut the phone cord. Call-center agents, particularly this sinister brood, should occupy the same circle of Hell that Dante reserved for landlords: the 9th circle. There, frozen in a solid block of ice for all time, they can contemplate their own malevolence while eternally staring at their dead dunned clients’ accounts.

One collection agency, DCM, presented the NYT reporter with a "stack" of letters of appreciation (names redacted). I found this one to be particularly tragic:

One widow wrote that a collector “was so nice to me, even when I could only pay $5 a month a few times.” Saying that money was “so tight” after her husband died, she added: “It was very hard for me, and to get a job at my age. Thank you.”

No wonder half of these agencies' new hires don't make it past 90 days. There is no amount of yoga classes, foosball or free lunches that could motivate me to use false sympathy and guilt tactics to collect on a bill, or make old widows go back to work to pay $5 a month.

FICO '08 Rolls Out… A Year Late

noreply@blogger.com (Unknown) — Thu, 29 Jan 2009 17:39:00 +0000

Yesterday, Fair Isaac Corp. (creator of the FICO score) and TransUnion, one of the three major credit bureaus, rolled out the long-anticipated FICO '08 to lenders.

The new scoring model changes a number of calculations. It's more forgiving of one-time "slips" – for example, the impact of a late payment will be less for someone who is in good standing on multiple credit accounts. Conversely, FICO '08 will be harder on those will have less impact on your credit score, whereas "repeat offenders" will see credit scores reflect habitual delinquencies. Those with good credit should see a slight increase in their scores; those with multiple delinquent accounts will see their score drop. The score will continue to range from 300 to 850.

Equifax is expected to roll out FICO '08 in the second quarter. Experian, which is currently embroiled in litigation with Fair Isaac, is not disclosing whether it will implement the new FICO '08 model. However, Experian recently sent a letter of termination to Fair Isaac, stating that it will no longer allow MyFICO to provide Experian MyFico scores to consumers. (Experian will continue to sell consumers the PLUS and VantageScores, which are NOT the scores used by lenders.)

One major concession in FICO '08 – the scoring model will continue to count authorized users (such as children or spouses) on credit card accounts. An authorized user on a good credit account will get a credit score boost. Fair Isaac has purportedly tweaked the algorithm to prevent credit repair companies from gaming the system.

According to the Wall Street Journal, Fair Isaac predicts FICO '08 will improve the accuracy of lending decisions by as much as 15%. But it may be a while before the score is widely available to consumers, as lenders will be carefully evaluating the score and deciding whether or not to use it.

Possibly the Biggest Credit Data Breach Ever?

noreply@blogger.com (Unknown) — Wed, 21 Jan 2009 17:37:00 +0000

A global cyber fraud operation is thought to be behind what may be the biggest credit data breach ever reported, eclipsing the 2007 TJX breach that compromised the data of 45 million customers.

The breach occurred on the internal computer network of Heartland Payment Systems, a major payment processing company that processes 100 million transactions each month from about 250,000 businesses nationwide.

How did this happen?
After a customer swipes a credit or debit card, the information is then transmitted to obtain authorization from a bank or payment company. During this brief transmission, the data is unencrypted. "Sniffer" software, which may have been installed on Heartland's network as far back as May 2008, captured card numbers, expiration dates, and some cardholder names and internal bank codes during this authorization period. Personal security codes are not believed to have been compromised.

What credit and debit cards are impacted?
Visa, MasterCard, Discover and American Express customers are vulnerable.

How many people could be affected?
An exact number of compromised customers is not available; however, according to a report in the New York Times, 600 million or more cardholders might be affected.

When was this breach discovered?
The breach was discovered last week by a forensic investigator following inquiries by Visa and MasterCard of suspicious activity surrounding processed card transactions.

What remedies do customers have?
Heartland has set up a Web site to provide updates to customers about the incident: www.2008breach.com. Cardholders are not responsible for unauthorized fraudulent charges made by third parties. The United States Secret Service and the Department of Justice are actively involved

Please review your credit card statements carefully each month for any charges that you don't recognize.

Lenders Begin to Look Beyond FICO

noreply@blogger.com (Unknown) — Sat, 10 Jan 2009 20:56:00 +0000

A few years ago, Fair Isaac reported that the average FICO credit score in the U.S. was 723 out of a possible 850. The higher the score, the greater the likelihood that the borrower would repay a loan.

At least that was what Fair Isaac pitched to lenders.

Thus spawned several years of streamlined loans – loans that were predicated solely on credit score. "Stated" loans allowed people with good credit scores to put down any income figure on a loan application and get approved. The sheer number of applications in an overheated market where an hour could mean a $50,000 difference in selling price necessitated glossing over details that were mandatory – or at least a consideration – in pre-FICO days. (I know you're thinking, what, there was a time when credit scores didn't exist? Credit scores weren't developed until the late 50s.)

According to an article in Time magazine,

A few years ago, Fair Isaac produced a chart predicting the odds that a borrower with a certain credit score would default on a mortgage. For example, it predicted that a loan to a borrower with a 680 score had a 1 in 144, or 0.7%, chance of becoming delinquent over the life of the loan; a person with a 700 FICO score would have a 1 in 288 chance, or just 0.3%.

Unfortunately, those predictions proved too optimistic. According to mortgage-data tracker First American Loan Performance, banks have already foreclosed on or are in the process of foreclosing on 1.5% of the mortgages originated in the last three months of 2007 to individuals with credit scores between 660 and 720. And those mortgages have been around for only a year. Over 30 years, the delinquency rate on those home loans is likely to be much higher.

The rise in defaults among "good credit" borrowers is beginning to force lenders to revert back to more traditional ways of predicting risk. Consumer advocates who have long opined that a three-digit credit score managed by for-profit entities is an inaccurate measure of creditworthiness should be pleased at this trend, which takes a number of variables (such as phone bill payment records) into account - especially helpful for those borrowers with thin or non-existent credit histories.

New Year's Resolution – Get Your Credit in Good Shape!

noreply@blogger.com (Unknown) — Mon, 05 Jan 2009 20:47:00 +0000

Ever since the credit bureaus were mandated to provide one free credit report each year, I've made requesting and reviewing my credit report part of my New Year tradition. It's my opportunity (and responsibility!) to make sure that I haven't been the victim of identity theft and that the credit bureaus are reporting my credit history accurately.

I was especially motivated to do so this year because I recently discovered that one of the credit bureaus is reporting erroneous information – information that is causing my credit score to vary 50-75 points from the other two scores.

This year, make a resolution to get your credit and finances in good health. Remember, the ONLY place to get your credit report for free (per the federal Fair Credit Reporting Act) is https://www.annualcreditreport.com/... NOT freecreditreport.com.

You may also order your credit reports by calling toll-free to 877-322-8228, or by mail. To request your credit report by mail:

Download the request form (You need an Adobe viewer to view the requested form. Download the free Adobe viewer)
Print and complete the form
Mail the completed form to:

Annual Credit Report Request Service
P.O. Box 105281
Atlanta, GA 30348-5281

Here are some tips on ordering your credit report (courtesy of Bankrate.com):

Free is free: If you have to supply a credit card or checking account number, it means you're going to pay. You may get the initial credit report for free, but you may also be signing up for a continuing service at a price.

No junk mail: Don't respond to e-mail offers for free credit reports -- they're almost always spam.

Be secure: Always be sure you're on a secured Web site when entering your personal information.

Keep it secret: When phoning the toll free number (877-322-8228) for a free credit report, ask that only the last four digits of your Social Security number are displayed on the reports to be mailed to you.

Reduce solicitations: Don't give out your e-mail address to obtain a federally mandated free credit report -- it is not required.

Run from pop-ups: If you do choose to go online to https://www.AnnualCreditReport.com and see pop-up ads, or if the site is not secure, close your browser and start over. Secure sites will have a padlock logo in the corner, and the address will begin with https:// instead of just http://.

Check and uncheck: If you go online to https://www.AnnualCreditReport.com, be sure to look for any pre-checked marketing or newsletter offers. If you decide you do not want these offers, uncheck the box.

Consumers Skeptical About New Credit Card Regulations

noreply@blogger.com (Unknown) — Sat, 20 Dec 2008 14:17:00 +0000

After years of complaints against the credit card companies for unfair and deceptive practices, the federal government approved sweeping new restrictions on credit card companies on Dec. 19. Consumer responses to the measure, however, show that many remain skeptical about the long-term benefits of the changes and strongly disapprove of the 18-month delay in implementation.

Many comments echoed the sentiments of one poster: "When was the last time Barnes & Noble called you up and said they wanted more money for the book they sold you last month? Have you EVER paid in full for a computer or a cd player or a shirt and later received a letter telling you the price was actually 500 or 1,000 percent more than what you had agreed to pay and you had better fork over the bucks? Credit card companies are not our friends; they should not be taking taxpayer hand-outs; they should not be permitted to abuse the citizens of this country. Further, I am SHOCKED that the new rules will not take effect for eighteen months. There is literally NO COST involved in effecting them NOW."

Another wrote: "These rules and regulations need to be implemented NOW, not almost two years from now. What a joke as the ripoff continues. How come the Wall Street bailouts always take place immediately, why do new taxes always take place immediately, but when it comes to given [sic] Main Street some help it always takes years from the time they pass the new rules."

Under the new regulations, banks, credit unions and savings associations are prohibited from raising interest rates on existing balances unless a payment was received more than 30 days late; charging a late fee if a borrower was given less than 21 days to pay; and applying payments in a way that would result in debts with higher interest rates getting repaid last. It also protects consumers against predatory credit cards that reduce available credit to subprime borrowers through fee harvesting.

"I believe the eighteen month grace period was a compromise," one commenter wrote. "This timing could make the regulations toothless. The potential is the banks will cull all accounts, reduce or eliminate available credit for millions, raise interest rates to 29.99% or higher for most people, raise late and overdraft fees to $50 or more, and use their current “contract” to extract as many dollars as possible from cardholders. When the new regulations go in effect they will have us where they want us."

The issue of consumer protection from credit card industry practices will continue to remain a priority in the Senate, according to Sen. Christopher Dodd (D-Conn.). In a recent Washington Post article, he is quoted as saying, "To restore our economic stability, we must stop credit card companies from ripping off their customers and driving them into deeper and deeper debt…While I expect the Federal Reserve's rules to be a significant step forward in addressing this issue, I believe we need a strong law in place to protect consumers from unfair credit card practices including 'anytime any reason' rate increases, universal default, excessive and unreasonable fees, and marketing targeted to young consumers."

The $970 billion industry stands to lose about $10-12 billion in annual revenue as a result of these changes. The banks have provided dire warnings about the measures, citing a probable decrease in the amount of available credit that would be extended to consumers and increased difficulty in qualifying for new credit.

But most agree with one poster's sentiments that the changes are long overdue: "Too little too late. Where was Congress when these scummy vultures were robbing the American public for the past 10-20 years? And why do they have 18 months to continue robbing us? Maybe to have more time to find loopholes and new ways to screw the public? Look, it's no secret any more that a large part of most banks revenues and profits come from usurous [sic] fees and bogus penalties. They have to find a way to continue to rob the public along these lines. And Congress has to give them time to find those ways so the campaign contributions continue to roll in."

Democratic Congress Passes Credit Cardholders' Bill of Rights

noreply@blogger.com (Unknown) — Wed, 24 Sep 2008 19:03:00 +0000

For anyone who has experienced universal default, where a credit card company raises its interest rate based on any change in your credit report, even if that change is unrelated to that company… or wondered why their payment due date has shrunk from 21 or more days to just 14… for anyone who has paid off their credit card in full and then got a bill the next month for interest accrued the previous month… for anyone who has been upset that payments are always applied to the lower-interest balance first… good news is on the horizon.

Yesterday, 228 Democrats and 84 Republicans in the U.S. House of Representatives voted to support The Credit Cardholders' Bill of Rights (H.R. 5244). The bill now heads to the U.S. Senate for its consideration.

Not unexpectedly, banks such as Bank of America, JPMorgan Chase, Citigroup, Capital One Financial Corp and Discover Financial Services oppose the bill. With the markets in turmoil and drowning from the collapse of the U.S. housing and subprime mortgage markets, the legislation could limit their credit card revenue by limiting the fees they can charge for practices that consumer advocates say are designed to hurt or deceive consumers. The White House also opposed the legislation, which seeks to curb unfair and deceptive credit card practices, saying it would constrain banks' ability to price risk.

Summary of the H.R. 5244 bill

111 Republicans and 1 Democrat voted "nay." How did your representative vote on H.R. 5244?

Do Medical Bills Hurt Your Credit Score?

noreply@blogger.com (Unknown) — Tue, 16 Sep 2008 20:49:00 +0000

MarketWatch recently addressed the issue of unpaid medical bills and the effect that those unpaid bills have on one's personal credit. The reader asked if medical bills are treated the same as outstanding credit card debt and whether it affects the FICO score.

According to the MarketWatch reporter, medical bills are treated differently than credit card debt and as a result, "don't always have a direct effect on your FICO score." That's because medical debt is not always reported to the credit bureaus – just the debts that have been sent to a collection agency. And the debt owed for medical bills does not count toward your total debt utilization ratio – that is, how much you owe on your credit card balances compared to your credit limits.

However, your Credit Mama has a few words of caution. Once your unpaid medical debt is forwarded to a collection agency, the debt is very likely to be reported to the credit bureaus. And as a collection debt, it will have a significantly negative impact on your FICO score.

If you are trying to qualify for a mortgage or car loan, a lender will look closely at any unpaid bills, including medical. Most mortgage lenders require that any unpaid bills over $500 (or multiple bills adding to $500) be paid in full before they will lend for a home or investment.

Fannie Mae guidelines generally require that collection accounts (including medical) in excess of $250 per individual account or $1,000 in the aggregate must be paid in full.

Given the current credit crisis, I believe most underwriters will not waive this requirement.

Medical bills are one of the top three reasons people file for bankruptcy, accounting for half of all U.S. bankruptcies. Most frightening is that 75.7% of those whose illnesses led to bankruptcy had insurance at the onset of the illness, according to a study published in the journal Health Affairs.

Bankrate.com suggests contacting the hospital directly to see whether you can qualify for low-income waivers or financial assistance, and researching nonprofit organizations that specialize in helping people with high medical debt to negotiate on your behalf to reduce the balance. Once you get sent to collections, you are dealing with a for-profit company that is not interested in you – just your repayment of the debt.

In case you missed it - a previous post on the new medical FICO scoring system that is being developed.

Overdraft Protection Will Cost You

noreply@blogger.com (Unknown) — Thu, 21 Aug 2008 13:30:00 +0000

Overdraft protection, a service offered by many banks as a convenience, kicks in when a bank approves a transaction and the customer doesn't have enough funds to cover the cost. The bank allows the transaction to go through, like a temporary loan, and then charges the customer a fee somewhere in the range of $25 to $35, regardless of how much the transaction was.

As many unsuspecting consumers have discovered, the convenience factor comes at a cost. One reader wrote that he had deposited a check for several thousand dollars in his bank account. Unbeknownst to him, however, the bank did not release the funds for several days. During that time, he assumed he had funds in his account, and used his debit card for a number of minor transactions – groceries, gasoline, movie tickets, prescription medications. Every transaction racked up an overdraft fee of $35. "That's $140 just in fees… and none of my purchases was over $35," he wrote.

According to a CNN Money article, debit card transactions account for nearly half of all overdrafts, with most of these transactions averaging far less than the overdraft fee itself. And if you don't repay your overdraft within a few days, some banks charge additional fees. The Center for Responsible Lending states that financial institutions "manipulate the order in which they clear deposits and withdrawals in order to maximize overdrafts," and estimates that Americans now pay $17.5 billion each year in fees for abusive overdraft loans, more than the $15.8 billion total paid out to cover those loans.

It's an issue that Congress has decided to act upon. Rep. Carolyn Maloney (D-NY), who introduced the "Credit Cardholders' Bill of Rights Act of 2008" (H.R. 5244), and Rep. Barney Frank (D-Mass.) are trying to protect consumers from such hefty fees with a new proposal: the Consumer Overdraft Protection Fair Practices Act (H.R. 946).

"I've been working on reducing sky-high overdraft fees for several years now," Congresswoman Maloney wrote to CNN Money.com. "Overdraft loans can be useful financial tools, but many consumers are being enrolled in costly overdraft protection programs without their consent." The legislation would require that consumers would have to "opt in" to overdraft protection programs, and banks would not only have to inform consumers when they are about to overdraw their accounts and allow them to cancel the transaction, but also would have to provide full, written disclosure of the overdraft policies to consumers.

But with banks countering massive losses in their mortgage portfolios with revenue-generating practices such as exorbitant overdraft fees, anytime rate hikes, universal default, and reducing the window between the time a bill is mailed and the payment due date, your Credit Mama is guessing that such a move will meet with great resistance by the banking industry lobbyists.

77 Percent Chance Your Credit Card Rate May Change for Any Reason

noreply@blogger.com (Unknown) — Thu, 14 Aug 2008 14:16:00 +0000

Imagine if after a year of owning your car and paying down your loan, the car dealer told you that your interest rate on the car loan was going up by double-digits because the dealer was having a bad year. Outrageous! you think. He can't do that!

Yet that is exactly what credit card issuers are doing. A survey released by Consumer Action, a nonprofit education and advocacy organization, found that 77 percent of the major financial institutions they contacted said they reserve the right to increase a cardholder's interest rates - even on existing balances - at any time and for any reason.

The reasons cited by bank officials included "the economy," "business strategies," or "market conditions" (the stated cause of recent rate hikes by Bank of America and Capital One).

At a time when a number of banks are finding themselves too heavily invested in failing mortgages, it is all too clear that some of the shortfall in profits may be covered by bumping rates and fees for consumers like you and me.

Other items of note:

The average default rate is now 26.87 perent, up from 24.51 percent in 2007. The highest default rate in the survey was HSBC, with a default rate at 31.99 percent. Default rates can click in for a number of reasons, including late payments to another company, too many inquiries on your credit file, or even a small drop in your credit score. Once your rate adjusts to the default rate, it's very difficult to re-adjust it downward.

"Chasing balances" is becoming a common practice whereby banks reduce credit limits based on their assessment of a customer's risk. A reduced credit limit negatively impacts your credit score by increasing your debt utilization ratio, which may then trigger the universal default clause. And if the consumer isn't aware that the limit has been decreased, he or she may very well be hit with an over-the-limit fee and then a penalty interest rate for being over the limit.

If you're not outraged, you're not paying attention. Contact your House and Senate representatives and tell them to support the Credit Cardholders Bill of Rights in the House (H.R. 5244), and the credit card bill in the Senate Banking Committee.

Shopping for Student Loans Damages Credit Scores

noreply@blogger.com (Unknown) — Mon, 11 Aug 2008 18:48:00 +0000

Fact: Too many credit inquiries can damage your credit. That's because the credit scoring formulas assume that the borrower is financially troubled and may even be going bankrupt.

Fact: If you comparison shop for a mortgage or car loan to try to get the best interest rate, FICO's secret credit scoring algorithms lump together all related inquiries that occur within a short period time. Such credit inquiries have a relatively neutral impact on credit scores.

Fact: The New York Times recently reported that students and parents shopping for the best rates on private student loans DO NOT benefit from the same type of calculations as those shopping for home or auto loans. Translation: each time you compare a new student loan, your credit file gets dinged with another inquiry. Each inquiry can drop your score up to 5 points.

It's a bad equation for students and parents:

Too many inquiries = lower credit score.
Lower credit score = higher rates on student loans.

If you have a thin credit history (as many students just getting out on their own often do), such inquiries may have an even greater impact. Anyone who has shopped for a mortgage knows that a measly five points can make a big difference in qualifying for that higher tier interest rate break.

Apparently the New York State Attorney General's office has stepped in and asked Fair Isaac, creator of the FICO score, to treat student loan borrowers the same as those shopping for mortgages and car loans. The Times reports that Fair Isaac isn't changing its policy any time soon and believes its policy doesn't cause any damage most of the time.

However, at least one credit bureau – Experian – confirmed that that this policy may have an impact on credit scores. And a spokesperson for Sallie Mae, the nation's largest private student loan lender, says the company does, in fact, see the negative impact on credit scores and believes that students should not be penalized for trying to make smart financial decisions.

The Times still recommends comparison shopping with 3-4 lenders, preferably within a week or two. Fair Isaac did say that IF there is any negative impact on credit scores, it is more likely to occur when people apply to smaller or specialized student loan lenders, and a lesser impact when applying to big banks.

The Times' advice:

"Start with a lender or two that your college recommends, since it may have negotiated special terms with them... [shop] one bank, one finance company that specializes in student loans and then [look] for nonprofit loan agencies that work with people in the state where you live or the state where you attend college (or both, if you’re lucky enough to have a choice)."

Check this list of lenders or ask people in the financial aid office whether a nonprofit lender serves the college.

FICO Decides to Keep Piggybackers After All

noreply@blogger.com (Unknown) — Thu, 07 Aug 2008 18:12:00 +0000

Fair Isaac Corporation has had a change of heart.

The creator of the FICO credit score had planned to roll out its new FICO '08 scoring system this year. Among the changes in this new version: banning "piggybacking," the process by which consumers with no credit or poor credit can benefit by being added as authorized users to the accounts of credit cardholders with good or excellent credit. Piggybacking was often used by parents to give their children a head start in building a good credit history or by a spouse trying to help their partner improve his or her score, but came under intense scrutiny after private companies started to profit from a business model that boosted credit scores of those who were paired with someone with good credit. Lenders were outraged by the practice, saying it dramatically increased their risk.

It is estimated that more than 50 million U.S. consumers are legitimate authorized users on another person's credit card. The new provision would effectively lower credit scores for millions of consumers, forcing them to pay more for everything from mortgages to car loans. And since about 1% of consumers would no longer have enough of a credit history to get a score at all, according to a survey by Credit.com, those consumers may not qualify for a loan at all.

Another concern dealt with regulatory issues. Lenders must comply with the Equal Credit Opportunity Act, which requires them to consider a spouse's credit history when weighing a potential borrower's credit risk. They warned Fair Isaac that such a change would prohibit them from using FICO scores if they wanted to be compliant with the ECOA.

At a recent Congressional hearing, the company announced that "after consulting with the Federal Reserve Board and the Federal Trade Commission earlier this year, Fair Isaac has decided to include consideration of authorized user trade lines present on the credit report." In a company press release, they state that their scientists have discovered a way to restore authorized user credit accounts to the calculation of FICO '08 scores while making it "much hard to game the system." No further details were provided regarding this technology.

To accommodate this change, the phased rollout of FICO '08 has been halted temporarily. It is not clear when the rollout will take place.

Identity Theft Alert: Anheuser-Busch Workers at Risk

noreply@blogger.com (Unknown) — Tue, 05 Aug 2008 18:11:00 +0000

If you work or have worked at Anheuser-Busch, your personal information (including Social Security number, addresses, date of birth, and more) may have been among those stolen when laptops disappeared from Anheuser-Busch's St. Louis headquarters in June.

Nationwide, about 150,000 people are affected; of those, 87,500 are in Florida.

If you have been affected, you are entitled to one year of free credit monitoring service.

Credit Card Companies Pull Back on Soliciting Via Direct Mail

noreply@blogger.com (Unknown) — Thu, 31 Jul 2008 18:09:00 +0000

The days of receiving credit card solicitations in your mailbox on a weekly or even daily basis may be over… at least temporarily.

Facing increasing delinquencies, consumers who are already credit-stretched, industry competition and profit losses, credit card companies have pulled back the reins on mailbox pitches, reducing the number of direct mail offers by an average of nearly 14 percent in the first quarter of 2008 compared to the same period in 2007.

According to a report in MSNBC.com, JPMorgan Chase reduced its mail volume by 34 percent, HSBC had a 23.3 percent reduction, and Bank of America and Capital One both cut mail volume by more than 17 percent.

Mortgage and loan companies cut their direct mailings by 6 percent. A handful of companies, including American Express, Discover and Washington Mutual, increased their volume slightly.

Of course, while there is a measurable decline in direct mail volume from banks and consumer lenders, there still is an enormous amount of direct mail solicitations landing in mailboxes, with an estimated 4.2 billion pieces of mail sent by financial service companies. According to Direct Marketing Association, U.S. banks and credit institutions spent $13.4 billion last year on direct marketing, generating $178.8 in sales.

Debt Collectors Using New Strategies and Technologies to Get Your Cash

noreply@blogger.com (Unknown) — Tue, 29 Jul 2008 15:47:00 +0000

As the economy slides and consumer debt and delinquencies rise, debt collectors are having an increasingly difficult time coercing cash-strapped people to fork over payments. Many are getting more creative – and often, more aggressive – in their efforts to collect payments.

According to an article in Newsweek, some collectors are even resorting to the types of harassing tactics that were made illegal years ago.

See You in Court
Collectors are taking people to court more often these days. Interestingly, some are going to court to defend themselves. Minnesota Attorney General Lori Swanson told Newsweek that she sued a debt collection agency for using illegal tactics, and expects this to be a growing trend among other AGs.

Debt Profiling
New software helps collectors assess debtors "most likely to pay big" by calculating what type of debt is owed, how old it is, how big it is, when the account was opened, credit reports, bankruptcy filings and the debtor's socioeconomic status.

Consumer advocates believe the software unfairly profiles debtors, as the data shows almost all of the people sued by debt collectors lived in low income, predominantly African American communities.

Telephone Tech
Collectors are using offshore call centers and automated dialers to find debtors. And about half of collectors are using automated calling systems with recorded messages. The problem with this method, however, is that many calls don't disclose who the debt collector is and what the call is about. Courts have held that this is deceptive. Even more problematic is that recorded messages may be left on a voice mail system used by more than one person – which could be considered unauthorized disclosure of the debt to a third party.

More and more collectors are calling cell phones – which often means that those in the lower-income bracket are paying for minutes spent on calls from collectors.

Negotiating Payment Plans
Under the philosophy of "a bird in the hand is worth two in the bush," collectors are becoming more open to negotiating partial payment plans.

Remember: debt collection agencies must identify themselves, and if you request it, they must prove that the debt is, in fact, yours.

Identity Theft Alert: Alaska Air Customers' Credit Cards Misused

noreply@blogger.com (Unknown) — Wed, 23 Jul 2008 15:45:00 +0000

If you bought tickets from Alaska or Horizon airlines, pay close attention to your credit card statements. (You should be doing this anyway, you know.)

About 1,500 customers have been notified that their credit cards were misused when a call center employee diverted some payments to a personal account.

The airlines' parent company is working with police to resolve the investigation and have stated that customers are not responsible for repaying the diversions that took place between August 2006 and June 2008.

I Never Said You Could Pull My Credit!

noreply@blogger.com (Unknown) — Wed, 16 Jul 2008 21:35:00 +0000

Dear Credit Mama,

I got a copy of my credit reports and noticed what appears to be a list of companies that have pulled my credit… companies that I had contacted about their service but never actually did business with or authorized to pull my credit. Don't businesses have to get permission to run a credit report? And should I do anything about this?

-- Danielle

Dear Danielle,

Yes, you are correct – under the Fair Credit Reporting Act, businesses must have your permission or a "permissible purpose" to pull someone's credit. (Permissible purpose means they have a legitimate need for the information.)

Merely inquiring about a service does not give the company the right to run your credit report. Companies should tell that they are pulling your credit or ask for your permission first. Employers must get written permission from you in order to check your credit.

These types of inquiries – known as "hard" inquiries – can have a negative impact on your credit score and will typically remain on your credit report for a year, sometimes up to two years.

Although the impact may be relatively minimal -- five points or so per inquiry -- recent studies show that an increase of just 30 points in one's credit score can have significant financial benefits… which means every point in your favor is important.

Hard vs. Soft Inquiries

Hard inquiries include requests for new credit (credit card or loan, or increase in credit card limit), employment credit checks, and applications for certain services such as cell phones or utilities.

Soft inquiries occur when your creditor reviews your files, creditors extend you offers of credit, or when you pull your own credit.

Action Steps

When inquiring about services, be upfront and let them know that you do not want your credit pulled without your permission.

If you believe that the companies listed on your credit report did not have a legitimate reason to access your credit, you can contact the company and request that they correct the information. You also can contact the credit bureaus directly to correct your report.

If the company is in the wrong and refuses to correct the information, you can sue them for up to $1,000 in statutory damages for violations of the Fair Credit Reporting Act.

Consumer Knowledge About Credit Improving… But Still Poor

noreply@blogger.com (Unknown) — Fri, 11 Jul 2008 15:29:00 +0000

Consumer awareness of credit scores is improving, but not enough to prevent $28 billion in credit card finance charges, according to a survey by the Consumer Federation of America and Washington Mutual, Inc.

According to the report, most Americans know why credit scores go up and down – for example, two-thirds understand that paying off a large credit card balance improves credit scores, and 80 percent know that missing monthly credit card payments lowers scores. And just about half of Americans have obtained their credit scores in the past two years.

However, the findings show that less than a third of Americans understand that a credit score reflects the risk that a consumer won't pay back a loan – most believe that it reflects factors such as their overall financial resources and that demographic factors such as income, education and age affect their score. And 59 percent did not know that maxxing out a credit card would lower their credit score.

According to estimates by Washington Mutual, a boost in one's credit score by 30 points would save a consumer $105 a year in credit card finance changes, as financial institutions offer lower interest rates to consumers with better scores. That translates to annual savings of $28 billion for all consumers.

To learn more about credit, check out the free webinars under "Your Credit Mama Recommends…"

Thieves Steal Gas With Stolen Sweetbay/Hannaford Customer Credit Cards

noreply@blogger.com (Unknown) — Tue, 08 Jul 2008 13:00:00 +0000

With gas prices floating over $4 a gallon and diesel approaching $5 a gallon, fuel is a valuable commodity that is attracting thieves along the East Coast.

The arrest of five Florida men who drove pickup trucks with hidden gas tanks that could hold up to 1,000 gallons of fuel brought to light a disturbing trend – the use of stolen credit card numbers to purchase excessive quantities of fuel at gas stations in several states. Murphy Oil, which runs Wal-Mart gas stations, reported losses of $1 million in one month as a result of similar gas thefts.

New cases involving the 4.2 million stolen credit and debit card numbers from the recent Hannaford/Sweetbay breach are being investigated as the crooks continue to try to convert the stolen numbers to cash.

If you used a credit or debit card at Sweetbay or Hannaford stores between Dec. 7 and March 10, keep a close eye on your bank or credit card statements and immediately challenge any purchases that are not yours.

Are You a Recent Victim of Identity Theft? If So, the FTC Wants to Hear From You.

noreply@blogger.com (Unknown) — Thu, 03 Jul 2008 12:50:00 +0000

The Federal Trade Commission has announced in the Federal Register that it will conduct a wide-ranging study of identity theft victims in order to assess the current remedies available to them following the crime. Identity theft victims who have contacted the FTC between January 1 and May 30, 2008, will be asked about their experiences after contacting one or more credit reporting agencies and when they sought to use their FACT Act rights.

The FACT Act (Fair and Accurate Credit Transactions Act of 2003) gives consumers certain rights in dealing with identity theft, including the ability to place fraud alerts on their credit files if they are, or suspect they may become, victims of identity theft, to block information on their credit reports that resulted from identity theft, and obtain copies of their credit reports free of charge.

For the seventh year in a row, identity theft has been the top consumer fraud complaint handled by the FTC. The agency's recent report shows that of 813,899 total complaints received in 2007, 258,427 (32%) were related to identity theft. The monetary losses related to identity fraud totals more than $1.2 billion; the median monetary loss per person was $349. Not included in this is the time-value equivalent (for example, the hours spent on the phone with credit bureaus, creditors and police, or monitoring bank and credit accounts for fraudulent activity), which can be significant.

And it appears that even with data breach notification laws in place by nearly all of the states, it has not slowed the proliferation of identity theft. Part of this is attributed to consumers ignoring data breach notification letters. But in most instances, inadequate security practices by companies handling sensitive data are the culprit.

The deadline for submitting comments is Sept. 2, 2008. Comments filed in electronic form should be submitted at: https://secure.commentworks.com/ftcfactasurvey. To ensure that the Commission considers an electronic comment, you must file it on the web-based form.

*** Remember: If you had any type of loan account between January 1987 and May 28, 2008, you are entitled to learn your credit score – free of charge – and get at least six months of a monitoring service from credit reporting giant TransUnion. The monitoring service would provide e-mail notification of late payment reports or accounts opened in your name – red flags that would indicate identity theft. You can file a claim by visiting http://www.listclassaction.com/ or calling 866-416-3470.

Credit Card Business "Rife With Scams"

noreply@blogger.com (Unknown) — Wed, 02 Jul 2008 13:41:00 +0000

Dear Credit Mama,

First, the credit card companies started changing the payment due dates on me. I used to get the bills about three weeks in advance of the due date. Then suddenly, it was two weeks. Now sometimes it seems like less than that.

I'm smart enough to always look at the due date right when the bill comes in and mark it on my bill-pay calendar. But last month they hit me with a late payment charge… when I KNOW I sent the check with plenty of time for it to arrive at the processing company. I'm lucky that this wasn't a card with a 0% "provisional" rate since that would have been bumped to 32% with this one wrongly-processed payment. I feel like their game now is to nickel-and-dime any extra fees they can squeeze out of the average consumer! Is it just me??

-- Joe "Fed UP" in N.C.

Dear Joe,

If you think that the credit card companies aren't necessarily on the side of consumers, you're right. The tactics that have been used increasingly over the past several years have capitalized on the tendencies of consumers not to look at their bills too closely, not to question extra fees, and to pay their bills as close to the due date as possible.

Thought I'd share an interesting comment that was posted on a diary on the dailykos.com blog. The author, KeepingItBlueKrstna, gives an insider's perspective on what it's like to work at a credit card company and offers some nuggets of advice:

I worked for a major credit card company, which has since been bought and then bought again, but it was one of the major players.

When I worked there, it was clear that the processing company we used was late posting payments that had arrived on time. They did it all the time.

The Customer Service Reps brought it to the attention of management and it was escalated all the way to the CEO. So did they fix the problem? No. They made a video (I kid you not) of how efficient the payment processing company was and how their systems worked and held a meeting to show it to us. They told us, sure you get a lot of calls about this, but it's because there are only so many possible due dates, and you'll get a wave of calls about late fees after certain due dates. They said "It's the customer's fault" (or the post office's fault) and don't waive too many late fees.

This was a large scale fraud like the one described above where statements are mailed late. And it wasn't just the late fee revenue they were after. They used people's "late" payment history as an excuse to raise their interest rate on the card to penalty levels, even if that was the only late payment. In some cases, they used that one "late" payment as an excuse to change someone to a card with an annual fee instead of none.

The credit card business is rife with scams like these, masquerading as a normal way of doing business.

I strongly advise paying your credit card bill online within the terms posted there. If it says your payment will be posted in 3 days, make it 4 days before the due date. This is, in my opinion, the only safe way to avoid late fees. If you are mailing your payment, no matter how careful you are, you could get screwed.

If you get an unfair late fee, you should not only call to ask for the fee to be reversed, but also at least ask to have that late payment wiped off your payment history. (We were able to do that - it was called a re-age, but don't use that term - someone may think it's fishy that you know it.)

We were told repeatedly only to waive fees for the very best customers and if we waived or re-aged too many accounts, we would get written up. But I did it all the time and never got written up. Especially for nice people.

Credit Card Advice From An Insider

noreply@blogger.com (Unknown) — Thu, 26 Jun 2008 19:45:00 +0000

Wanted to share this interesting post I found at DailyKos.com, courtesy of Lava20.

Who am I? My name is Nicole. I worked for the two largest credit card companies in the world. I worked in various departments, but the most important department I worked for was customer service. This advice is just one friend to another. It is based on my own personal experience with what does and doesn't work.

1. Protest every fee. Overdraft fees. Late fees. Call and ask for the fee to be waived. If you were late. Call. If they tell you no. Ask again. If they tell you no. Ask for a supervisor. Most fees can be waived. The times the bank will not waive a fee is if you are 60 days or more behind. Or if you are always over your credit limit. I promise you. If you are willing to spend the time. That fee will be waived. This works about 85% of the time. I'll be honest here. The only reason that they may not waive the fee is if you are over 30 days late in the last 6 months or over 60 days in the last 12 months. So catch up if you can. Then make that call. You might be part of that 15%.

2. Report your card as lost or stolen. WHAT? Yes. This goes for debit cards also. Once you give out your credit card number, you have no control over who has access to your information. How often? I do this twice a year. If you shop online a great deal, do it more often. I know no one who reads this surfs porn, but if one does do this, you might want to cancel your cards more often. It doesn’t effect your credit report any, if at all. As long as you’re not doing it every week on every card, you’re fine. This is also helpful to prevent id theft.

[Note from Your Credit Mama: If you struggle to pay your minimums or have a hard time keeping your account below the limit, DO NOT DO THIS. If you are late on your payment or over your limit or have an internal "credit score" too low, or bad credit elsewhere, when you call to do this, they will close your account since it was "stolen" but may NOT issue you a new card. Also, many card issuers now routinely issue replacement cards after a certain period of time.]

3. If the bank makes an error, it’s never in your favor. So don’t do any sort of direct authorization to your checking account. For example, you might give your checking account number and routing number so that the minimum payment will be charged every month. Not a good idea. Errors can happen. I have seen many times where the bank has charged the members account for the total credit card balance instead of the minimum balance. This causes the members checking accounts to become overdrawn. The bank may be required to reimburse you for their own credit card fees. But it is completely up to the credit card company if they pay your banks fees (overdraft fees, fees to the store you wrote the check to etc.) Don't risk it. Your best bet here: Use your personal banking account and sign up with your bank to pay bills online.

4. Do not sign up for anything the credit card company wants to auto bill you for. Save yourself the time and headache. Insurance. Fraud protection. This is a billion dollar industry. And normally you will get no benefit from it. In fact, you will most likely spend more time trying to cancel it than any benefit you will receive from it. I have yet to meet the person who saved time or money with a fraud prevention unit that they couldn't do on their own. If you want to, go for it. Good luck. You're going to need it.

5. The only thing that will save you money is time. You must call. Every single time. Program the customer service number to your credit card company into your phone. right now. You don’t have to have your credit card number to call. Have them look your account up by your Social Security Number or name. Call every month to ask for lower interest rates. To have fees waived. To check your balance. To lower your credit limit. For every little thing.

I want to give an example here. Two different accounts. One group of members have high credit limits, pay off their bill in full every month. The other group pays as much as they can every month and has interest fees. Who saves the most? The first. Why? Because they call. They will have us read off every damn purchase. They will have us explain in detail over and over again how the interest is calculated. They will stay on the phone for 30 minutes to get the $50 yearly membership fee waived. And you know what? It works. They get a free service, basically. And bravo. The credit card company expects this. They also count on you, the person reading this right now, to be the person who doesn't do this.

One other thing I would like to bring up with this diary. Sometimes things happen. For example, I’ve seen entire zip codes where card members statements arrive late. Thousands may not receive their statement in enough time to mail the payment. This is strange because it appears that most of these card members all live in the same zip code, or they may all hold Union cards (the highest interest rate and the most revolvers – people who carry balances.) This makes the card member late in sending in a payment. And wouldn’t you know it. Millions of late fees. Most call to have the fees reversed. That’s fine with the credit card company. Because they only really need 10% to not bother.

Did you just say 10%? Yes. That’s all they need really. It doesn’t cost them anything if you never call. In fact, they can save here too. What would a smart bank do?: on the days the late mailed statement arrives, make sure that is the day that most of your customer service representatives are off. That way people will have to wait longer to get through to a live agent. Many don’t want to spend their Saturdays waiting for a customer service rep to answer. So they hang up. BINGO that 10% just went to 12% now. Millions. So again. Read #1.

One neat trick credit card companies use is to shorten the amount of time you have to send in a payment. This varies by bank. Normally you want 25 days. I've seen as short as 20. Call. Ask them for a longer length of time to send you bill in. Even if you don't need it. Why have the bank earn interest on the money if you can?

One final word of advice. Try not to sign up for auto anything. Again, it is so very difficult to get things auto-billed to stop. The company might be great, but unless you are getting a huge discount, I wouldn’t take the risk. If you do insist on auto-billing make sure you do #2! And if you do have things auto billed...make sure it is to a debit or credit card. That way you can easily report it lost/stolen when your friendly everyday auto insurance company decides to raise your premiums and change from monthly to biannual.

Okay. I saved the best for last. Guess what will work more than all the other things listed her combined? BE NICE!!! W T F?!?! Yes, calling with a bitchy attitudes actually inspires a customer service representative to do the least they can for you. Now, I may be taking the 100th call for the day about the statement arriving late, and all 99 of them have been royal jerks...then I get lucky number 100...who has read this diary and might start off the conversation like this, "Thank you so much for taking my call, I really hate to call with this, but do you think you can help me out with this late fee..." Throw in the customer service representative's name, no matter how horrid, tell them you love that name...

That Visit to the Marriage Counselor May Hurt Your Credit Score

noreply@blogger.com (Unknown) — Fri, 20 Jun 2008 19:27:00 +0000

Same with a visit to a massage parlor, bar, tire and re-treading shop or billiard hall. Discrimination against consumers based on purchasing behavior is the heart of the issue in a lawsuit filed by the Federal Trade Commission against Atlanta-based card issuer CompuCredit Visa.

According to a report in Business Week,

The allegations, in part, focus on CompuCredit's Aspire Visa, a subprime credit card for risky borrowers. The FTC claims that CompuCredit didn't properly disclose that it monitored spending and cut credit lines if consumers used their cards at certain places. Among them: tire and retreading shops, massage parlors, bars, billiard halls, and marriage counseling offices.
"The company touted that cardholders could use their credit cards anywhere," says J. Reilly Dolan, assistant director for financial practices at the FTC. "What they didn't say was that you could be punished for specific kinds of purchases."

The algorithms for determining credit scores – and there are many different versions – are highly guarded. Your Credit Mama has outlined the basics of the FICO scoring model, which is based on things like debt utilization, on-time payments, etc. But it appears from this lawsuit that there are many undisclosed variables that can have a negative impact on your financial profile. If you've always suspected that purchasing behavior – not just payment history – influences your credit score, this case may prove you right.

The Federal Deposit Insurance Corp. is also seeking $200 million in penalties from CompuCredit in the matter.

First, Thieves Steal Identities. Now They Steal Homes.

noreply@blogger.com (Unknown) — Tue, 17 Jun 2008 19:23:00 +0000

The Chicago Tribune recently investigated an FBI report on new identity theft tactics being used by thieves to "steal" your home.

The report warns of several ways in which people have been conned out of their homes. While thieves generally target vacation homes or empty homes, the FBI has investigated sales of occupied houses. By law, as the rightful owner, you won't lose your house as long as you have proof that you are the legitimate owner. But it's likely to cause an enormous expenditure of time and money.

Among the cases being investigated by the FBI:

Con artists "stole" an occupied house and sold it to someone so enamored of the great price is getting that he's satisfied with online photos.
Thieves posed as the rightful owner and took out home equity lines of credit against the property, draining it slowly so it wouldn't be detected.
Thieves deposited proceeds from an illegal loan into a business account to get under the lender's radar.
Cons changed the title of a house to his name and sold the house.

All of the schemes involved using the owner's personal information to create fake IDs and Social Security cards so that the thief can file the papers to complete and/or transfer the property.

"In one case prosecuted by the feds, the ID thieves used the name-change mechanism offered to people who are getting married or divorced to obtain false driver's licenses, which they used to get Social Security numbers," the Tribune reported. In most cases, though, business records are the main source of private information theft.

A "red flag" rider to the Fair and Accurate Credit Transaction Act of 2003 was recently passed by Congress. This rider, which takes effect Nov. 1, 2008, requires any business that handles personal documents to develop a program to prevent ID theft. That includes financial institutions and creditors.

The guidelines say institutions should be on the lookout for actions such as:

ID theft alerts from fraud detection services, customers, law enforcement agencies and others
a credit bureau's notice of credit freeze provided to an institution along with the institution's requested consumer credit report
an increase in credit report inquiries or other unusual patterns on a credit report
the appearance of doctored or forged documents
inconsistent information
identifying information associated with known fraudulent activity
use of a single Social Security Number or other identifying number used to open accounts under different names
applicants failing to provide all required identifying information
information supplied that is not consistent with existing information on file
a new revolving credit account used in a manner commonly associated with fraud patterns
an account used in a manner not consistent with established patterns of activity on the account
mail sent to the customer's on file address repeatedly returned as undeliverable.

Sigh. Yet another good reason to check your credit report regularly.

WaMu Suspends $6 Billion in HELOCs

noreply@blogger.com (Unknown) — Fri, 13 Jun 2008 14:16:00 +0000

As banks look for ways to stop the bleeding and reduce their losses, WaMu has decided to tighten its purse strings by joining Bank of America, Countrywide, JPMorgan Chase and others in reducing or suspending home equity lines of credit (HELOC).

The amount of money that WaMu has eliminated is about $6 billion. The company cites those customers with declining home values and poor payment histories as primary targets for a HELOC reduction or suspension.

If you have had your home equity line of credit suspended or reduced, you will want to keep an eye on your credit score. That's because this type of action can increase your debt utilization ratio and drop your score significantly.

For example:

If you had a $25,000 credit line and you have used $10,000, your debt ratio is:

$10,000 (debt) ÷ $25,000 (total available credit) = 40%

But if the bank suspends your account to your existing balance, your debt ratio is maxed out:

$10,000 (debt) ÷ $10,000 (total available credit) = 100%

Since 30% of your credit score is your debt ratio, going from 40% to 100% debt ratio will not only decrease your financial flexibility but also your credit score.